MTN shares worst in six months

Lower-than-expected profits, Iran sanctions bite

By Nick Hedley - 07 March 2019

MTN Image: BLOOMBERG/WALDO SWIEGERS

MTN’s shares are at their worst level in nearly six months as the market comes to terms with the company’s lowerthan-expected profits for 2018 and as sanctions on its thirdlargest market, Iran, start to bite.

The stock was down 1.4% at R76.15 on Wednesday morning.

A year ago – before MTN’s run-ins with authorities in Nigeria led to a sharp sell-off in the second half of the year – the share was trading above R122.

The group’s stock has slipped more than 10% since on Thursday last week, when MTN disappointed the market by saying its headline earnings per share in the year ended December would be between 80% and 90% higher than in 2017.

Analysts had expected a higher increase, given that the numbers were coming off a low base.

MTN is due to report its full numbers for 2018 on Thursday.

Vestact CEO Paul Theron said in a note to clients on Wednesday that Iran’s economic woes presented another risk to MTN.

The mobile giant has 44.6 million subscribers in that market via its 49%-held venture, MTN Irancell.

That business contributed R7bn in revenue for MTN in the first half of 2018, though the group is struggling to repatriate funds because of US sanctions.

“The country’s economy is falling apart, as its oil exports sink and its currency collapses, both largely in response to US sanctions,” Theron said.

“In an effort to offset the economy’s weakness, Iranian President Hassan Rouhani has pushed forward a budget that will run a deficit of about 10% of GDP or 60% of the state’s general budget,” Theron said. “That seems very risky.” MTN has also been accused of paying bribes to SA and Iranian officials to secure its licence there in 2005.

MTN denies any wrongdoing, saying it has been cleared by an independent jurist.

“Along with its problems in Nigeria, these concerns have weighed heavily on the MTN share price,” Theron said.

“It’s trading below R80 per share, which is most disheartening. For now, we wait.”

MTN’s shares crashed in the second half of 2018 when it was slapped with a $2bn (R28.4bn) tax claim from Nigeria’s attorney-general, and a demand from its central bank that it return $8.1bn (R114bn) worth of dividends.

MTN reached a settlement with Nigeria’s central bank in late December, with the $8.1bn claim being reduced to $53m (R752m), though the tax matter is unresolved.